B. Ravikumar - Profile on Academia.edu (original) (raw)
Papers by B. Ravikumar
Submission Number: PET09-09-00005
Education finance in a dynamic Tiebout economy
We use computational experiments to study the impact of two in-stitutions, centralized funding an... more We use computational experiments to study the impact of two in-stitutions, centralized funding and vouchers, on the distribution of income in a dynamic, two-school-district economy where public fund-ing levels are determined by majority rule. In this model, household ...
SSRN Electronic Journal, 2013
This paper deals with a classic development question: how can the process of economic development... more This paper deals with a classic development question: how can the process of economic development-transition from stagnation in a traditional technology to industrialization and prosperity with a modern technology-be accelerated? Lewis (1954) and Rostow (1956) argue that the pace of industrialization is limited by the rate of capital formation which in turn is limited by the savings rate of workers close to subsistence. We argue that access to capital goods in the world market can be quantitatively important in speeding up the transition. We develop a parsimonious open-economy model where traditional and modern technologies coexist (a dual economy in the sense of Lewis (1954)). We show that a decline in the world price of capital goods in an open economy increases the rate of capital formation and speeds up the pace of industrialization relative to a closed economy that lacks access to cheaper capital goods. In the long run, the investment rate in the open economy is twice as high as in the closed economy and the per capita income is 23 percent higher.
We examine the quantitative effect of search frictions in product markets on asset price volatili... more We examine the quantitative effect of search frictions in product markets on asset price volatility. We combine several features from Shi (1997) and Lagos and Wright (2002) in a model without money. Households prefer special goods and general goods. Special goods can be obtained only via a search in decentralized markets. General goods can be obtained via trade in centralized competitive markets and via ownership of an asset. There is only one asset in our model that yields general goods. The asset is also used as a medium of exchange in the decentralized market to obtain the special goods. The value of the asset in facilitating transactions in the decentralized market is determined endogenously. This transaction role makes the asset pricing implications of our model different from those in the standard asset pricing model. Our model not only delivers the observed average rate of return on equity and the volatility of the equity price, but also accounts for most of the spectral char...
Economic Synopses, 2020
, the ratio of cumulative confirmed cases to cumulative tests in the United States was nearly 20 ... more , the ratio of cumulative confirmed cases to cumulative tests in the United States was nearly 20 percent, while in South Korea the ratio was 2 percent (Figure 1). Both countries had their first confirmed case on practically the same day, January 20 for South Korea and January 21 for the United States. 1 Yet, almost three months later, the fraction of people that tested positive for COVID-19 is remarkably higher in the United States than in South Korea. This essay explores the reason why.
Economic Synopses, 2015
Returns on government debt bear little resemblance to returns on productive capital.
Opting our of Publically Provided Services: A M ajority Voting Result
Journal of Monetary Economics, 1992
We develop a neoclassical capita! accur,mlation mode! with seasonal perturbations to tastes and t... more We develop a neoclassical capita! accur,mlation mode! with seasonal perturbations to tastes and technology. We calibrate the lnode! and use it to study the impact of seasonal demand and supply perturbations on economic activity. We find that the impact is largely limited to a single quarter. We also use our mode! to isolate the seasonal movements in U.S. quarterly data and then compute the seasonal variations in tastes and technology that approximately explain these mnvements. We find comovements in productivity and taste perturbations that are very similar to the seasonal comovements of aggregate variables. *The opinions expressed herein are those of the authors and do not necessarily reflect those of the Federal Reserve Bank of Philadelphia or the Federal Reserve System. We would like to thank an anonymous referee. Larry Christiano. Michael Dotsey, and seminar participants at the Federal Reserve Bank of Atlanta, University of Rochester. and University of lowa for helpful comments. We are especially grateful to Robert ng for some very useful suggestions early on in the project and to Jeffrey Miron for providing the data.
Majority voting and means-tested vouchers
Work. Pap., Univ. of Iowa, 2004
We develop a model of publicly funded means-tested education vouchers. In this model, the voucher... more We develop a model of publicly funded means-tested education vouchers. In this model, the voucher received by each household is a decreasing function of household income. We prove the existence of a sequential majority voting equilibrium where households vote over both ...
International Trade and Economic Dynamics
Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch ge... more Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may be saved and copied for your personal and scholarly purposes. You are not to copy documents for public or commercial purposes, to exhibit the documents publicly, to make them publicly available on the internet, or to distribute or otherwise use the documents in public. If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence.
Federal Reserve Bank of St. Louis, Working Papers, 2017
We compute welfare gains from trade in a dynamic, multicountry model with capital accumulation an... more We compute welfare gains from trade in a dynamic, multicountry model with capital accumulation and trade imbalances. We develop a gradient-free method to compute the exact transition paths for 44 countries following a trade liberalization. We find that (i) larger countries accumulate a current account surplus and financial resources flow from larger countries to smaller countries boosting consumption in the latter, (ii) countries with larger short-run trade deficits accumulate capital faster, (iii) the gains are nonlinear in the reduction in trade costs, and (iv) capital accumulation accounts for substantial gains. The net foreign asset (NFA) position before the liberalization and the tradeables intensity in investment goods production and consumption goods production are quantitatively important for the gains.
Federal Reserve Bank of St. Louis, Working Papers, 2015
College-educated workers entering the labor market in 1940 experienced a 4-fold increase in their... more College-educated workers entering the labor market in 1940 experienced a 4-fold increase in their labor earnings between the ages of 25 and 55; in contrast, the increase was 2.6-fold for those entering the market in 1980. For workers without a college education these figures are 3.6-fold and 1.5-fold, respectively. Why are earnings profiles flatter for recent cohorts? We build a parsimonious model of schooling and human capital accumulation on the job, and calibrate it to earnings statistics of workers from the 1940 cohort. The model accounts for 99 percent of the flattening of earnings profiles for workers with a college education between the 1940 and the 1980 cohorts (52 percent for workers without a college education). The flattening in our model results from a single exogenous factor: the increasing price of skills. The higher skill price induces (i) higher college enrollment for recent cohorts and thus a change in the educational composition of workers and (ii) higher human capital at the start of work life for college-educated workers in the recent cohorts, which implies lower earnings growth over the life cycle.
Federal Reserve Bank of St. Louis, Working Papers, 2017
International trade in capital goods has quantitatively important effects on economic development... more International trade in capital goods has quantitatively important effects on economic development through two channels: capital formation and aggregate TFP. We embed a multi country, multi sector Ricardian model of trade into a neoclassical growth framework. Our model matches several trade and development facts within a unified framework: the world distribution of capital goods production and trade, crosscountry differences in investment rate and price of final goods, and crosscountry equalization of price of capital goods. Reducing barriers to trade capital goods allows poor countries to access more efficient means of capital goods production abroad, leading to relatively higher capitaloutput ratios. Meanwhile, poor countries can specialize more in their comparative advantage-non-capital goods production-and increase their TFP. The income gap between rich and poor countries declines by 40 percent by eliminating barriers to trade capital goods.
Strategic Complementarity in Business Formation: Aggregate Fluctuations and Sunspot Equilibria
The Review of Economic Studies, 1993
The possibility of sunspot equilibria and endogenous cycles are explored in a two-sector overlapp... more The possibility of sunspot equilibria and endogenous cycles are explored in a two-sector overlapping-generations model with entry. It is shown that if prospective entrants act oligopolisti-cally as producers but competitively as consumers then a strategic ...
SSRN Electronic Journal, 2012
In this paper we show that price equalization alone is not sufficient to establish that there are... more In this paper we show that price equalization alone is not sufficient to establish that there are no barriers to international trade. There are many barrier combinations that deliver price equalization, but each combination implies a different volume of trade. Therefore, in order to make statements about trade barriers it is necessary to know the trade flows. We demonstrate this first theoretically in a simple two-country model. We then extend the result quantitatively to a multi-country model with two sectors. We show that for the case of capital goods trade, barriers have to be large in order to be consistent with the observed trade flows. Our model also implies that capital goods prices look similar across countries, an implication that is consistent with data. Zero barriers to trade in capital goods will deliver price equalization in capital goods, but cannot reproduce the observed trade flows in our model. * We would like to thank Eric Bond, Mario Crucini, and Elias Dinopoulos for their comments and George Fortier for editorial assistance. We would also like to thank participants at the
SSRN Electronic Journal, 2009
We examine quantitatively why uniform vouchers have repeatedly su¤ered electoral defeats against ... more We examine quantitatively why uniform vouchers have repeatedly su¤ered electoral defeats against the current system where public and private schools coexist. We argue that the topping-up option available under uniform vouchers is not su¢ ciently valuable for the poorer households to prefer the uniform vouchers to the current mix of public and private education. We then develop a model of publicly funded means-tested education vouchers where the voucher received by each household is a linearly decreasing function of income. Public policy, which is determined by majority voting, consists of two dimensions: the overall funding level (or the tax rate) and the slope of the means testing function. We solve the model when the political decisions are sequential-households vote …rst on the tax rate and then on the extent of means testing. We establish that a majority voting equilibrium exists. We show that the means-tested voucher regime is majority preferred to the status-quo. These results are robust to alternative preference parameters, income distribution parameters and voter turnout.
SSRN Electronic Journal, 2013
We develop a theory of labor quality based on (i) the division of the labor force between unskill... more We develop a theory of labor quality based on (i) the division of the labor force between unskilled and skilled workers and (ii) investments in skilled workers. In our theory, countries differ in two key dimensions: talent and total factor productivity (TFP). We measure talent using the observed achievement levels from the Programme for International Student Assessment (PISA) scores. Our findings imply that the quality of labor in rich countries is about twice as large as the quality in poor countries. Thus, the implied disparities in TFP levels are smaller relative to the standard growth model using a Mincerian measure of labor quality. In our model, the resulting elasticity of output per worker with respect to TFP is about 2.
A benefit of uniform currency? Manuscript
We study a model of endogenous means testing where households differ in their income and where th... more We study a model of endogenous means testing where households differ in their income and where the in-kind transfer received by each household declines with income. Majority voting determines the two dimensions of public policy: the size of the welfare program and the means-testing rate. We establish the existence of a sequential majority-voting equilibrium and show that the means-testing rate increases with the size of the program but the fraction and the identity of the households receiving the transfers are independent of the program size. Furthermore, the set of subsidy recipients does not depend on households' preferences, but depends only on income heterogeneity.
Submission Number: PET09-09-00005
Education finance in a dynamic Tiebout economy
We use computational experiments to study the impact of two in-stitutions, centralized funding an... more We use computational experiments to study the impact of two in-stitutions, centralized funding and vouchers, on the distribution of income in a dynamic, two-school-district economy where public fund-ing levels are determined by majority rule. In this model, household ...
SSRN Electronic Journal, 2013
This paper deals with a classic development question: how can the process of economic development... more This paper deals with a classic development question: how can the process of economic development-transition from stagnation in a traditional technology to industrialization and prosperity with a modern technology-be accelerated? Lewis (1954) and Rostow (1956) argue that the pace of industrialization is limited by the rate of capital formation which in turn is limited by the savings rate of workers close to subsistence. We argue that access to capital goods in the world market can be quantitatively important in speeding up the transition. We develop a parsimonious open-economy model where traditional and modern technologies coexist (a dual economy in the sense of Lewis (1954)). We show that a decline in the world price of capital goods in an open economy increases the rate of capital formation and speeds up the pace of industrialization relative to a closed economy that lacks access to cheaper capital goods. In the long run, the investment rate in the open economy is twice as high as in the closed economy and the per capita income is 23 percent higher.
We examine the quantitative effect of search frictions in product markets on asset price volatili... more We examine the quantitative effect of search frictions in product markets on asset price volatility. We combine several features from Shi (1997) and Lagos and Wright (2002) in a model without money. Households prefer special goods and general goods. Special goods can be obtained only via a search in decentralized markets. General goods can be obtained via trade in centralized competitive markets and via ownership of an asset. There is only one asset in our model that yields general goods. The asset is also used as a medium of exchange in the decentralized market to obtain the special goods. The value of the asset in facilitating transactions in the decentralized market is determined endogenously. This transaction role makes the asset pricing implications of our model different from those in the standard asset pricing model. Our model not only delivers the observed average rate of return on equity and the volatility of the equity price, but also accounts for most of the spectral char...
Economic Synopses, 2020
, the ratio of cumulative confirmed cases to cumulative tests in the United States was nearly 20 ... more , the ratio of cumulative confirmed cases to cumulative tests in the United States was nearly 20 percent, while in South Korea the ratio was 2 percent (Figure 1). Both countries had their first confirmed case on practically the same day, January 20 for South Korea and January 21 for the United States. 1 Yet, almost three months later, the fraction of people that tested positive for COVID-19 is remarkably higher in the United States than in South Korea. This essay explores the reason why.
Economic Synopses, 2015
Returns on government debt bear little resemblance to returns on productive capital.
Opting our of Publically Provided Services: A M ajority Voting Result
Journal of Monetary Economics, 1992
We develop a neoclassical capita! accur,mlation mode! with seasonal perturbations to tastes and t... more We develop a neoclassical capita! accur,mlation mode! with seasonal perturbations to tastes and technology. We calibrate the lnode! and use it to study the impact of seasonal demand and supply perturbations on economic activity. We find that the impact is largely limited to a single quarter. We also use our mode! to isolate the seasonal movements in U.S. quarterly data and then compute the seasonal variations in tastes and technology that approximately explain these mnvements. We find comovements in productivity and taste perturbations that are very similar to the seasonal comovements of aggregate variables. *The opinions expressed herein are those of the authors and do not necessarily reflect those of the Federal Reserve Bank of Philadelphia or the Federal Reserve System. We would like to thank an anonymous referee. Larry Christiano. Michael Dotsey, and seminar participants at the Federal Reserve Bank of Atlanta, University of Rochester. and University of lowa for helpful comments. We are especially grateful to Robert ng for some very useful suggestions early on in the project and to Jeffrey Miron for providing the data.
Majority voting and means-tested vouchers
Work. Pap., Univ. of Iowa, 2004
We develop a model of publicly funded means-tested education vouchers. In this model, the voucher... more We develop a model of publicly funded means-tested education vouchers. In this model, the voucher received by each household is a decreasing function of household income. We prove the existence of a sequential majority voting equilibrium where households vote over both ...
International Trade and Economic Dynamics
Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch ge... more Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may be saved and copied for your personal and scholarly purposes. You are not to copy documents for public or commercial purposes, to exhibit the documents publicly, to make them publicly available on the internet, or to distribute or otherwise use the documents in public. If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence.
Federal Reserve Bank of St. Louis, Working Papers, 2017
We compute welfare gains from trade in a dynamic, multicountry model with capital accumulation an... more We compute welfare gains from trade in a dynamic, multicountry model with capital accumulation and trade imbalances. We develop a gradient-free method to compute the exact transition paths for 44 countries following a trade liberalization. We find that (i) larger countries accumulate a current account surplus and financial resources flow from larger countries to smaller countries boosting consumption in the latter, (ii) countries with larger short-run trade deficits accumulate capital faster, (iii) the gains are nonlinear in the reduction in trade costs, and (iv) capital accumulation accounts for substantial gains. The net foreign asset (NFA) position before the liberalization and the tradeables intensity in investment goods production and consumption goods production are quantitatively important for the gains.
Federal Reserve Bank of St. Louis, Working Papers, 2015
College-educated workers entering the labor market in 1940 experienced a 4-fold increase in their... more College-educated workers entering the labor market in 1940 experienced a 4-fold increase in their labor earnings between the ages of 25 and 55; in contrast, the increase was 2.6-fold for those entering the market in 1980. For workers without a college education these figures are 3.6-fold and 1.5-fold, respectively. Why are earnings profiles flatter for recent cohorts? We build a parsimonious model of schooling and human capital accumulation on the job, and calibrate it to earnings statistics of workers from the 1940 cohort. The model accounts for 99 percent of the flattening of earnings profiles for workers with a college education between the 1940 and the 1980 cohorts (52 percent for workers without a college education). The flattening in our model results from a single exogenous factor: the increasing price of skills. The higher skill price induces (i) higher college enrollment for recent cohorts and thus a change in the educational composition of workers and (ii) higher human capital at the start of work life for college-educated workers in the recent cohorts, which implies lower earnings growth over the life cycle.
Federal Reserve Bank of St. Louis, Working Papers, 2017
International trade in capital goods has quantitatively important effects on economic development... more International trade in capital goods has quantitatively important effects on economic development through two channels: capital formation and aggregate TFP. We embed a multi country, multi sector Ricardian model of trade into a neoclassical growth framework. Our model matches several trade and development facts within a unified framework: the world distribution of capital goods production and trade, crosscountry differences in investment rate and price of final goods, and crosscountry equalization of price of capital goods. Reducing barriers to trade capital goods allows poor countries to access more efficient means of capital goods production abroad, leading to relatively higher capitaloutput ratios. Meanwhile, poor countries can specialize more in their comparative advantage-non-capital goods production-and increase their TFP. The income gap between rich and poor countries declines by 40 percent by eliminating barriers to trade capital goods.
Strategic Complementarity in Business Formation: Aggregate Fluctuations and Sunspot Equilibria
The Review of Economic Studies, 1993
The possibility of sunspot equilibria and endogenous cycles are explored in a two-sector overlapp... more The possibility of sunspot equilibria and endogenous cycles are explored in a two-sector overlapping-generations model with entry. It is shown that if prospective entrants act oligopolisti-cally as producers but competitively as consumers then a strategic ...
SSRN Electronic Journal, 2012
In this paper we show that price equalization alone is not sufficient to establish that there are... more In this paper we show that price equalization alone is not sufficient to establish that there are no barriers to international trade. There are many barrier combinations that deliver price equalization, but each combination implies a different volume of trade. Therefore, in order to make statements about trade barriers it is necessary to know the trade flows. We demonstrate this first theoretically in a simple two-country model. We then extend the result quantitatively to a multi-country model with two sectors. We show that for the case of capital goods trade, barriers have to be large in order to be consistent with the observed trade flows. Our model also implies that capital goods prices look similar across countries, an implication that is consistent with data. Zero barriers to trade in capital goods will deliver price equalization in capital goods, but cannot reproduce the observed trade flows in our model. * We would like to thank Eric Bond, Mario Crucini, and Elias Dinopoulos for their comments and George Fortier for editorial assistance. We would also like to thank participants at the
SSRN Electronic Journal, 2009
We examine quantitatively why uniform vouchers have repeatedly su¤ered electoral defeats against ... more We examine quantitatively why uniform vouchers have repeatedly su¤ered electoral defeats against the current system where public and private schools coexist. We argue that the topping-up option available under uniform vouchers is not su¢ ciently valuable for the poorer households to prefer the uniform vouchers to the current mix of public and private education. We then develop a model of publicly funded means-tested education vouchers where the voucher received by each household is a linearly decreasing function of income. Public policy, which is determined by majority voting, consists of two dimensions: the overall funding level (or the tax rate) and the slope of the means testing function. We solve the model when the political decisions are sequential-households vote …rst on the tax rate and then on the extent of means testing. We establish that a majority voting equilibrium exists. We show that the means-tested voucher regime is majority preferred to the status-quo. These results are robust to alternative preference parameters, income distribution parameters and voter turnout.
SSRN Electronic Journal, 2013
We develop a theory of labor quality based on (i) the division of the labor force between unskill... more We develop a theory of labor quality based on (i) the division of the labor force between unskilled and skilled workers and (ii) investments in skilled workers. In our theory, countries differ in two key dimensions: talent and total factor productivity (TFP). We measure talent using the observed achievement levels from the Programme for International Student Assessment (PISA) scores. Our findings imply that the quality of labor in rich countries is about twice as large as the quality in poor countries. Thus, the implied disparities in TFP levels are smaller relative to the standard growth model using a Mincerian measure of labor quality. In our model, the resulting elasticity of output per worker with respect to TFP is about 2.
A benefit of uniform currency? Manuscript
We study a model of endogenous means testing where households differ in their income and where th... more We study a model of endogenous means testing where households differ in their income and where the in-kind transfer received by each household declines with income. Majority voting determines the two dimensions of public policy: the size of the welfare program and the means-testing rate. We establish the existence of a sequential majority-voting equilibrium and show that the means-testing rate increases with the size of the program but the fraction and the identity of the households receiving the transfers are independent of the program size. Furthermore, the set of subsidy recipients does not depend on households' preferences, but depends only on income heterogeneity.